Why McDonald's is still a powerhouse despite sluggish sales and bad PR

McDonald's sales have been sputtering for more than two years,
and the company seems trapped in a cycle of bad headlines that
most likely will not end soon.

Its quarterly earnings results on Wednesday aren't expected to be
pretty either, and there's a chance its dominance will continue
to wane as newer players keep coming onto the scene.

But don't write the obituary just yet. McDonald's has many
strengths that the rivals biting at its heels can only envy,
including Ronald McDonald's worldwide recognition. The Golden
Arches will need to put them to good use to remain the world's
largest restaurant chain.

Here are six reasons McDonald's is nowhere close to death's door
for now.

Massive reach

McDonald's has more than 14,300 locations in the US, and that
ubiquity still makes it a default option for many diners. The
burrito chain Chipotle is in growth mode but still only a
fraction of that size, with about 1,800 locations. (Shake Shack,
whose stock offering earlier this year garnered lots of
attention, has fewer than 40.)

Because of the chain's recent struggles, McDonald's plans to slow
its growth to its lowest level in five years. But "slow" is
relative: It still plans to add 600 to 700 restaurants around the
world this year, on top of the more than 36,200 it already has.

Chipotle has said it plans to open up to 205 new stores this
year, mostly in the US.

Marketing materials for
the Sirloin Third Pound Burgers at McDonald's.McDonald's

Marketing power

McDonald's has enormous marketing muscle, in large part because
its franchisees are required to contribute at least 4% of their
sales to advertising.

That huge bucket of money is split in two ways. Some goes to
national advertising and focuses on burnishing the brand. The
rest goes to regional advertising and focuses more on promotions
to drive customers to stores.

Advertising doesn't have to be expensive to be effective, of
course. But McDonald's deep pockets give it a clear advantage.

Printing money

The recent sales decline in the US is squeezing franchisees, who
still have to pay for fixed costs like labor and electricity.

But McDonald's restaurants continue to generate a lot more cash
than their peers. In 2014, the average McDonald's restaurant
raked in $2.5 million in sales, according to the industry tracker
Technomic. Wendy's restaurants pulled in an average of $1.6
million, while Burger King pulled in $1.2 million.

A big reason for the difference: the popularity of McDonald's
breakfast.

Average annual sales for Shake Shack are far higher at $4.6
million, according to Technomic. But that's in part because Shake
Shack is concentrated in New York City, where volumes tend to be
higher. The average Chipotle generates roughly the same sales
volume as McDonald's even without breakfast, in part because of
its fast-moving line and higher prices.

A McDonald's breakfast
arranged for an illustration at a McDonald's restaurant in New
York.AP

Unlocking breakfast

Fans of McDonald's breakfast have long called on the chain to
offer it past 10:30 a.m. McDonald's is finally giving the idea a
serious try with a test of an all-day breakfast menu in San
Diego.

It's just one way McDonald's might bring more customers into its
stores and may signal the company's willingness to take bigger
risks with its menu.

Big companies tend to be cautious about change, and McDonald's in
particular is known for its methodical decision-making. But
executives may pick up the pace to avoid becoming outdated and
give customers what they want.

New leadership

The
new McDonald's CEO, Steve Easterbrook.Reuters

McDonald's CEO Steve Easterbrook stepped into his role just last
month and said he wanted to make McDonald's a "modern,
progressive burger company." In a meet-and-greet with analysts,
he also referred to himself as an "internal activist" at the
company, according to Sara Senatore, a Bernstein analyst.

Another new executive is Mike Andres, who became president of the
US division in October and has a deep history with McDonald's. He
started as a manager for his family-owned McDonald's and has
served in a variety of leadership roles at the company.

(Side note: Andres' father was a pilot for Ray Kroc, who built
McDonald's into a fast-food giant.)

McDonald's has been here before

The troubles McDonald's is facing are partly the result of a
shifting industry, with many smaller players posing a challenge
to the big guys. If that trend keeps up, McDonald's may not be
able to save itself.

At the same time, it's easy to forget that McDonald's has had
rough patches before — and pulled out of them.

Consider the expanded menu and focus on value that former CEO Jim
Skinner used to turn around business. It isn't an ancient
example; Skinner's tenure was from 2004 to 2012, the last few
years of which were some of McDonald's strongest.